Why has Sunak deliberately excluded 3m from COVID support?

[anonymous-user]

The current Labour government are simply behaving like socialist governments do. Pay rises for public sector, little or no support for private business creation, authoritarian and hypocritical. What do you expect?

[Countdown]

chrispmartha said:

Countdown said:

chrispmartha said:

What those criticising people using dividends often don’t realise is that paying yourself this way means the company pays more corporation tax as a result.

It’s not the huge tax benefit that people seem to think

It's a significant saving on Ees NI and Ers NI (circa 25% off the top of my head) and that's before any creative accounting which absolutely no Contractor on PH ever does

Yes but as I say its ads to your corporation tax bill. Its no where near the savings tgat people think

Off the top of my head the savings on Income tax (20%) AND Nat Insurance (25%) exceed the additional costs of CT + dividend tax (19% plus 7.5%)

[Oakey]

If there's no benefit to taking dividends then why bother?

[98elise]

Oakey said:

If there's no benefit to taking dividends then why bother?

There is a benefit, just not as big as most people think. On the flip side you can't take dividends as regular payments or HMRC will deem it salary.

As to the bother of dividends, it was easier than paying it as salary from an accounting perspective. Salary has to go through payroll and every payment reported to HMRC real time.

I took dividends once a year.

[chrispmartha]

Oakey said:

If there's no benefit to taking dividends then why bother?

There are benefits just not the amount that people think

[CaptainSlow]

chrispmartha said:

Oakey said:

If there's no benefit to taking dividends then why bother?

There are benefits just not the amount that people think

Can you run us through an example so we can see?

[chrispmartha]

CaptainSlow said:

chrispmartha said:

Oakey said:

If there's no benefit to taking dividends then why bother?

There are benefits just not the amount that people think

Can you run us through an example so we can see?

Countdown has already given the figures above.

[CaptainSlow]

chrispmartha said:

CaptainSlow said:

chrispmartha said:

Oakey said:

If there's no benefit to taking dividends then why bother?

There are benefits just not the amount that people think

Can you run us through an example so we can see?

Countdown has already given the figures above.

I mean a true example, base on an £80k salary.

..and £450 a day alternative.

[chrispmartha]

CaptainSlow said:

chrispmartha said:

CaptainSlow said:

chrispmartha said:

Oakey said:

If there's no benefit to taking dividends then why bother?

There are benefits just not the amount that people think

Can you run us through an example so we can see?

Countdown has already given the figures above.

I mean a true example, base on an £80k salary.

..and £450 a day alternative.

There’s loads of calculators online.

[98elise]

Countdown said:

98elise said:

JagLover said:

Louis Balfour said:

Martin Lewis was speaking about this again on the Marr programme this morning.

Evidently, he asked Sunak directly "Can I tell all company directors that the door is permanently closed to them?" To which the answer was "yes".

So they structured their affairs to avoid paying National INSURANCE and then wonder why they didn't get a pay out

Why would it be tied to NI?

Because paying NI entitles you to certain State benefits (Pension, Jobseekers allowance etc). SEISS is basically another State benefit.

Lots of benefits are paid out without any NI contribution being required. Furlough for example doesn't depend on NI.

[CaptainSlow]

chrispmartha said:

CaptainSlow said:

chrispmartha said:

CaptainSlow said:

chrispmartha said:

Oakey said:

If there's no benefit to taking dividends then why bother?

There are benefits just not the amount that people think

Can you run us through an example so we can see?

Countdown has already given the figures above.

I mean a true example, base on an £80k salary.

..and £450 a day alternative.

There’s loads of calculators online.

I want to see your calculations, you have said there isn't much difference.

[chrispmartha]

CaptainSlow said:

chrispmartha said:

CaptainSlow said:

chrispmartha said:

CaptainSlow said:

chrispmartha said:

Oakey said:

If there's no benefit to taking dividends then why bother?

There are benefits just not the amount that people think

Can you run us through an example so we can see?

Countdown has already given the figures above.

I mean a true example, base on an £80k salary.

..and £450 a day alternative.

There’s loads of calculators online.

I want to see your calculations, you have said there isn't much difference.

Im not going to post my personal income details sorry, if you are bothered type in whatever figures you want i to the online calculator

I also didn’t say there isn’t much difference, i said it’s not as much as people think.

[anonymous-user]

CaptainSlow said:

I want to see your calculations and you have said there isn't much difference.

Very broad strokes (use calculator for exacts)...

£80k as dividends;

Take £9k as salary. No income tax and minimal employee/employer NI. Next £6.5k is tax free (£12.5k tax free allowance plus £3k dividend allowance). Next £34.5k taxed at 7.5% then after £50k taxed at 37.5%. Business cannot class dividends as a cost, therefore must pay 19% corporation tax on pre-dividend profits (assuming profitability).

Taken as salary;

First £9k tax and NI free. Then from £9k, employee pays NI at about 12% and employer another 13%. From £12.5k income tax kicks in on top at 20%. From £50k NI reduces but income tax increases to 40%. Salary is classed as operating cost and this.money is not subject to corporation tax.

I have a small ltd with 3 employees taking about £80k a year out. We would pay overall (company and individuals combined) £7k less a year in tax by using dividends as opposed to salary. As it happens, it's a new business without distributable reserves some pay salaries ar present.

[Pit Pony]

Louis Balfour said:

So is the consensus that, with regard to directors and dividends, the lack of support is a kind of punishment for not paying optimal tax?

The Tories seem to hate one man/woman LTD companies more than the unions.

I have no idea why.

Just like they seem to hate small BTL empires. (Of one or a few properties)

[plasticpig]

Louis Balfour said:

Martin Lewis was speaking about this again on the Marr programme this morning.

Evidently, he asked Sunak directly "Can I tell all company directors that the door is permanently closed to them?" To which the answer was "yes".

Except it wasn’t and isn’t. I am a director and I was on furlough (not for that long). It’s a small company but one that recognises there is a distinct difference between employment and investment income.

I am also a shareholder in another small company. Why should the directors be compensated for loss of investment income and a shareholder not be? Both the directors and the shareholders are not at fault for Covid.

[NerveAgent]

JagLover said:

So they structured their affairs to avoid paying National INSURANCE and then wonder why they didn't get a pay out

Although you can claim furlough on the small salary that is likely set just before the NI threshold...

[Gecko1978]

98elise said:

Oakey said:

If there's no benefit to taking dividends then why bother?

There is a benefit, just not as big as most people think. On the flip side you can't take dividends as regular payments or HMRC will deem it salary.

As to the bother of dividends, it was easier than paying it as salary from an accounting perspective. Salary has to go through payroll and every payment reported to HMRC real time.

I took dividends once a year.

Again its the running a business bit people don't get. If you are employed you get paid X each month even if there is no work, if work dries up totally to the point your are not required your employer pays you redundancy. If you are a Ltd your work dries up you get zero so you physically can't pay a salary. Dividends are a good way of flexing that. Earn more one month pay out more earn less pay less.

Being forced onto an inside contract since 2020 i pay full paye plus employer NI out of my day rate. If I don't work next week my income is zero no one will pay me and the cash I would have held back in my busiess has already gone to HMRC. The umbrella pay me at national minimum wage so if I am sick I can in theory get £70 a week or such like. I earn around £200k and pay full employee taxes on that but get no employment protection. Via my limited I adjust my income so the lean times are covered. I now cant do that.

The issues is those who think this is equitable just see the huge salary and think, you can afford it you deserve it etc, without considering the risk contractors face is not one that do. If I do a bad job I am dismissed there an then. If a perm member of staff does a bad job its almost impossible to fire them there an then.

Firms like contractors, we are highly skilled and we can be used then dropped as the need arises. Staff don't like us because we get paid more. There is going to be no change in the rules Rishi has made up his mind we have to pay. There are likely consequences. I work in a department of 50, none of us are perm. We would have had to move on after 2 years under old rules. Now I can stay forever if i pay all paye tax....guess who the firm are hiring for new roles...so perm staff will find longer term all jobs are FTC or contacts and the protection they got in the past will disappear.

[768]

Oakey said:

If there's no benefit to taking dividends then why bother?

Because my company income isn't fixed, it varies considerably, so I take a payment only after I know what's left.

[Countdown]

CaptainSlow said:

I mean a true example, base on an £80k salary.

..and £450 a day alternative.

There are some figures below which compare Contracting to Umbrella. These should give a rough idea as to the savings of PAYE vs LtdCo

https://www.itcontracting.com/calculators/limited-...

Umbrella is similar to PAYE except the Individual is allowed to claim certain expenses that a PAYE Employee couldn't.

[Gecko1978]

Countdown said:

CaptainSlow said:

I mean a true example, base on an £80k salary.

..and £450 a day alternative.

There are some figures below which compare Contracting to Umbrella. These should give a rough idea as to the savings of PAYE vs LtdCo

https://www.itcontracting.com/calculators/limited-...

Umbrella is similar to PAYE except the Individual is allowed to claim certain expenses that a PAYE Employee couldn't.

Re expenses, the end client has to sign a SDC, blanket ban means they simply refuse so in practice zero expeses can be claimed.